Overhill Farms income declines on freight costs

May 9, 2012
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by Meat&Poultry Staff

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LOS ANGELES – Increased prices for commodities, energy and freight pressured Overhill Farms Inc. revenues in the second quarter. The company reported net income of $974,400 or $.06 per diluted share on net revenues of $50.2 million for the second quarter ended April 1. This compares to net income of $1.5 million or $.10 per diluted share on net revenues of $40.5 million for the comparable year-ago period.

"We are pleased to be able to report an increase in revenues, primarily a result of increased sales in both our foodservice and retail sectors, including sales of the Boston Market line,” said James Rudis, chairman and chief executive officer of Overhill Farms. “Our net income reflects the continuing very challenging conditions in the market, which include the high cost of freight and energy, increases in commodity prices and strong price competition in the retail segment."

Rudis said higher freight costs accounted for the majority of the company’s decrease in gross profit margins for the quarter. However, the company has taken steps to address the issue, such as rebidding freight arrangements and re-evaluating its distribution strategies.

"We have identified significant potential near-term savings in production and marketing expenses of the Boston Market line, and believe there is room for us to achieve more," Rudis said.

Rudis noted that strong retail and foodservice sales reflect the company's successful efforts to offset the effects of a difficult economy. In addition, he said, commodity prices appear to have peaked, which would reduce pressure on margins. Also, he said, the company is actively pursuing product development activities for new and existing customers.

Net revenues for the second quarter of fiscal 2012 increased by $9.7 million, or 24 percent, from year-ago levels due to net revenues of $8.7 million in sales of the company's portion of Boston Market products and higher foodservice sales volume, the company said.

Retail net revenues climbed $5.7 million, or 21.4 percent, to $32.3 million compared to $26.6 million for the second quarter of 2011. Sales of the company's portion of Boston Market products of $8.7 million drove the increase. However, reduced sales of Jenny Craig Inc. of $3.7 million offset those gains.

Overhill Farms entered into a co-manufacturing, sales and distribution agreement with Bellisio Foods Inc., for the Boston Market line. The deal includes the production of Boston Market products for retailers in the eastern half of the US.

Foodservice net revenues advanced by $4.3 million, or 35.8 percent, to $16.3 million for the second quarter compared to $12 million for the year-ago period. The company attributed the increase to rising sales volume to Panda Restaurant Group of $4.5 million.

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